Both ISS and Glass Lewis have issued their 2016 policy updates. Glass Lewis issued its 2016 policy with little fanfare in early November and ISS issued its updated policies for 2016 on November 20, 2015. Links to both firms’ 2016 policies are as follows:
- Glass Lewis’ Proxy Paper Guidelines, 2016 Proxy Season: http://www.glasslewis.com/assets/uploads/2015/11/GUIDELINES_United_States_20161.pdf
- ISS’ Americas Proxy Voting Guidelines Updates, 2016 Benchmark Policy Recommendations: http://www.issgovernance.com/file/policy/2016-americas-policy-updates.pdf
ISS at the same time issued an updated FAQ on its Equity Plan Scorecard (EPSC) Policy: 2016 U.S. Equity Plan Scorecard, Frequently Asked Questions: http://www.issgovernance.com/file/policy/faq-on-iss-us-equity-plan-scorecard-methodology.pdf
The ISS policy updates and FAQs apply to shareholder meetings held on or after February 1, 2016.
Taking a look at the specific policy updates of each for 2016 concerned with compensation, we see the following:
Glass Lewis now indicates that if it identifies egregious compensation practices, it may not only recommend against the Say-on-Pay vote but also recommend against the compensation committee based on the practices or actions of the committee during the year. Glass Lewis identifies as possible egregious practices: large one-off payments; the inappropriate, unjustified use of discretion; or, sustained poor pay performance practices.
ISS’ 2016 policy updates did not directly impact the majority of its compensation policies. Of note is that ISS did revise its policy with respect to compensation-related votes at externally-managed issuers. Now, ISS will generally recommend against the Say-on-Pay proposal where there is an external management structure in place and there is insufficient detail in the company’s disclosures for ISS to perform a comprehensive pay-for-performance analysis. ISS also changed the way ti will approach shareholder proposals to adopt holding periods and will now “strongly consider retention ratio and holding period duration among several other factors.”
In regard to directors, ISS also modified its policy with respect to overboarding. ISS is providing a 1-year transition period for companies to comply with the new overboarding policy and will only issue “warnings” in its proxy reports. After that period, ISS will issue negative vote recommendations on directors who are not public company CEOs and who sit on more than five (5) public company boards. ISS will issue such negative vote recommendations until the director sits on five (5) or fewer public company boards. ISS decided not to further restrict the number of boards on which an acting CEO can sit (Sitting CEOs will not be overboarded unless they sit on more than three public company boards–their own board and up to two (2) other public company boards).